COUNTRY PROFILE: Guatemala Ramps Up BPO Services, But Can it Meet Skilled Labor Demands?

By Tarun George

When Guatemala arrived on the outsourcing stage a decade ago, it was pegged as the new destination of choice in Central America. But after the first two big fish Capgemini and ACS jumped in, it quickly became evident that Guatemala did not have a well thought-out plan of action to ramp up and ride the outsourcing wave. The perception in following years was of a saturated labor market and a country that had missed its peak.

Recently however, Guatemala is pulling off an impressive comeback in BPO and contact center services, buoyed by promo agency Invest in Guatemala working to replenish the labor supply and provide quality talent to meet firms’ demand. That’s an ambitious goal, and it remains to be seen whether the country can throw off the old image and deliver.

With the largest population in the region (13.5 million), and close proximity to the US in the northern part of Central America, it’s easy to see why contact center companies find Guatemala attractive. Because of the manpower, their operations tend to be very large. Shared service firms in the country are Transactel (over 3000 employees), Atento (2000), 24/7 Customer (over 1000), ACS (over 1000) and Genpact (over 700, with plans to reach 2000). Other back office operations include ExxonMobil, Shell, Digitex and Capgemini.

GDP is US$ 67.8 billion, and currency risk rating of the quetzal is BBB- by Standard and Poor’s.

Ranked 100 out of 183 countries in the World Bank’s Ease of Doing Business Index 2010; and 91 out of 178 countries in Transparency International’s 2010 Corruption Perceptions Index

Same time zone as US, and air travel time to Guatemala is approximately 3 hours.

Workforce of 4.1 million, with 70% of the population below the age of 30.

Labor pool

With the largest student numbers in Central America (170,000 students enrolled in ten universities), Guatemala is in an enviable position. “Students are very Americanized, and there’s no need for cultural immersion programs when they’re hired”, says Mario Lopez, VP Human Resources and Marketing at Transactel. Robbie Brillhart, Vice President of BPO at Capgemini agrees – “Our primary advantage in Guatemala is the close US affiliation of the talent pool. There’s a heavy flow of people back and forth from the US, and they’re very in touch with North American culture”. Around 25,000 Guatemalans in the US lose their visas and return home every year.

Language proficiency – Unfortunately, cultural affinity doesn’t translate into bilingual ability, at least in the call center industry. “The high English proficient section of the labor pool works in accounting and engineering”, says John Glasgow, General Manager of CEDS, a regional language training organization. “Call centers, especially the news ones trying to establish, are not able to capture enough volume of English capability off the street. But there’s huge potential”.

The Guatemalan Export Association (AGEXPORT) is working to harness that potential. Apart from implementing English education in primary schools and requiring a TOEFL pass mark to graduate from university, the organization offers 2000 scholarships for intensive English courses, to help call centers offset the costs of employee language training. But these initiatives have had limited results, and Mario España, Director of Invest in Guatemala, knows it. “We’re working with the American Chamber of Commerce and the private sector call center industry on a new language project”, he said. “It’s a training system that addresses the skilled labor needs of BPO companies, and ensures that the output is ready to work in the industry. It will standardize the way English is taught here, and that teaching will be focused on language needed for call centers”.

Nearshore Americas has been hearing rumors of this project for some time now, and it will be big news when it’s finalized. Even though most of the high-proficiency English speakers (level 7 out of 10) in Guatemala are already employed, there are many workers around the 4-4.5 range, who can be made ready for call center work with quite limited investment and training. According to España, the pilot project for the new program will focus on them first, and will be rolled out in February.

In terms of Spanish-based voice services, companies rave about the neutral accent of Guatemalan workers that can be used to serve the Mexican and Hispanic US markets. Guatemala has grown from 2000 agents in 2007 to around 9000 agents currently employed, half of which serve the domestic market, with the other half serving external markets.

Marketing to the masses – The word often used in relation to Guatemala’s workforce is ‘potential’. In spite of the number of workers, the call center industry is not yet seen as a viable career option according to Glasgow. “The market got saturated quickly, and with no plan to train or replace those workers, the perception of what the industry could offer declined”, he says. “They stopped applying, because they just don’t consider it a choice”.

As a result, Guatemala is one of the few countries where the investment promo agency has to market not just to foreign firms, but also to the domestic workforce. “Many agents worked in a call center for six months, and then left because they didn’t like it. So there’s a huge talent pool already with the basic training that can be re-absorbed, if outsourcing jobs are made attractive to them again”, says Estuardo Robles, Central American Business Development Analyst at Zagada Markets. “There’s so much unfulfilled potential, if someone would go in and develop the talent pool”. Transactel and Capgemini have both told us that they’re starting to see difficulty in hiring, but it hasn’t got to the downward spiral of attrition and saturation yet.

More bang for your Quetzal

Salary – One of Guatemala’s biggest attractors is the low wage rate relative to its Central American competition. With salaries in Costa Rica rising and an increasingly saturated labor market in Panama, call centers are coming to Guatemala for savings. A bilingual call center rep earns approximately $500-600 per month, excluding benefits, while a non-bilingual agent’s wage could be as low as $300-400. The entry-level IT programmer’s salary is around $700-800 per month. Employees are obliged to contribute 10.67% of the annual wage as social security, and also pay a 13th month wage. “We’re actually moving quite a few jobs from South America to Guatemala. It’s much cheaper for us to deliver services from here than from Chile for example”, says Brillhart of Capgemini, one of the BPO heavyweights in the country. “In coming years I think we’ll see that movement from other companies as well”.

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Infrastructure – Another advantage for Guatemala is the strength of its telecom networks. The country privatized telecommunications in 1996, as well as the IT and information service providers in the country. The result is one of the region’s most open regulatory frameworks, a fast growing telecom sector, and strong infrastructure due to both local and foreign competition. With access to an ocean on either side, Guatemala ensures 99% redundancy in connections to both Pacific and Atlantic fiber optic cables. “We have stable connections and stable utilities”, says Brillhart. “Guatemalans are very connected – there are 1.2 cell phones for every person in Guatemala City, and social media is huge here”. Guatemala has the lowest mobile phone rates in Latin America.

Business climate

Investment incentives – As with many LatAm countries, Guatemala has a strict non-discriminatory law towards foreign investors, and capital is allowed to freely move in and out of the country. There is also a system of Free Trade Zones which provide greater tax benefits, and call centers can apply to locate within them. However the underlying point is that there are no incentives targeted specifically towards the BPO and ITO industries. “We target companies that will come for the middle and long term, not those that are simply chasing the next investment incentive”, says España. “That being said, we provide free advisory services for companies. We set up meetings and country tours, and essentially do their due diligence for them”.

Labor rights – A big marketing point for Invest in Guatemala is always the Dominican Republic-Central America Free Trade Agreement (DR-CAFTA) with the US, which allows US companies unrestricted access to its market. However there were certain conditions that came with the treaty, among which was the protection of labor and union rights. In July, the US government filed a formal case against the Guatemalan government for failure to enforce those rights, citing a list of violations. This is the first time the US has protested workers’ rights in a partner country under an FTA, and that further reinforced negative perceptions of Guatemala to North American clients.

Guatemala’s low ranks from the ratings organizations up above are reflective of the business environment. Crime and corruption are a problem in Guatemala, but call center managers have told us that it’s more a concern at the government level. The private sector has a different dynamic, and it’s a competitive business landscape if you take the right precautions.

Perceptions

To sum up, Guatemala’s challenges include replenishing the labor supply adequately, and ensuring that that labor supply has access to adequate English training to meet the demands of call centers.

Overall, the country has a strong value proposition for BPO and call center companies. However the Guatemalan call center industry will continue to struggle against its image both within the country’s workforce, as well as in US corporate circles. “It’s true”, says España. “We need to do a stronger marketing push to sell the country brand and what the BPO industry here can offer, and put Guatemala on the scene for investment promotion. If companies can just get past their perceptions and come visit, they’re always surprised by what they find”.